Tuesday

11th May 2021

Opinion

Are art 'freeports' tip of EU tax avoidance iceberg?

  • There are concerns that paintings and masterpieces could be stashed in freeports as a means of laundering money (Photo: Matt Tempest)

If the EU is serious about tackling tax havens, it needs to clean its own house first.

Battling the tax havens and legislative loopholes which plague the bloc would be a potent weapon against the continent's surging populists, who frequently invoke tacit agreements between political elites and fat cats to avoid taxation.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Tax avoidance costs EU countries hundreds of billions of euros—some estimates suggest as much as $1 trillion [€0.88 trn]; Europe loses as much as 20 percent of the corporate taxes to which it is entitled.

Widespread tax evasion also allows corrupt politicians and criminals to launder money and protect ill-gotten gains, but the continent's tax havens also undermine fair competition between EU states and encourage tax malpractice.

Dutch historian Rutger Bergman shed some light on the problem at the recent Davos World Economic Forum: "I hear people talking the language of participation, justice, equality and transparency, but almost no one raises the real issue of tax avoidance, right? And of the rich just not paying their fair share."

Secretive 'tax limbo' freeports

The EU will be unable to lead the global fight against tax evasion, however, while there are still tax havens on EU soil, notably on some British islands and in Luxembourg.

Recently, members of the European Parliament raised concerns about the risks presented by Le Freeport, a 22,000 square meter high-security facility located near Luxembourg airport, where goods can be stored with confidentiality—and without being taxed.

German MEP Wolf Klinz of the parliament's special committee on financial crimes, tax evasion and tax avoidance in early January sent the European commission president Jean-Claude Juncker an official request to take action against legal loopholes used for tax evasion and money laundering at Luxembourg's Le Freeport.

Last February, committee members and MEPs Ana Gomes and Evelyn Regner visited Le Freeport and called it a "black hole" with "a real lack of transparency".

The MEPs aren't the first to point out problems with the Freeport.

In 2014, journalist James Moore highlighted the potential of this facility to serve as a kind of tax haven.

He noted how "the Luxembourg facility opened in the same week that the OECD unveiled proposals to tackle multinational corporate tax avoidance. Critics argue that the growth [of] freeports represent a new battleground in the fight against tax avoidance by individuals."

Perhaps most notably, there are concerns that paintings and masterpieces could be stashed in freeports as a means of laundering money.

According to a recent report in the Art Newspaper, "the rise of art as an asset class has contributed to a sharp increase in freeports – from less than 100 in 1975 to around 3,000 in 135 countries in 2008".

A number of the world's biggest freeports, including Le Freeport Luxembourg, facilities in Geneva and Singapore are linked to Yves Bouvier, a Swiss art dealer who has been investigated in a number of jurisdictions for complicity in money-laundering and tax-evasion.

As a report by the European Parliamentary Research Service pointed out: "This concentration of a worldwide network of connected freeports and different roles could imply a risk of conflicting interests and insider trading. The fact that Mr Bouvier is entangled in an affair involving alleged fraud and insider trading may justify such considerations."

Freeports not only bolthole for tax avoidance

It remains to be seen whether or not the EU cracks down on freeports following MEPs' concerns.

But even if the freeports disappeared, the tax problem would endure.

For example, the ultra-wealthy are increasingly taking advantage of a lack of harmonisation between jurisdictions to store works of art on their yachts–and possibly avoid tax–a serious concern which the EU and G7 must address.

The British conservator Pandora Mather-Lees has described a yacht containing more than 800 pieces of art that were worth more than double the vessel itself: "There are superyachts with better collections than some national museums," she says.

The storage of priceless works of art in freeports and aboard luxury yachts has not only raised concerns over their physical safety, but also fundamental questions about what art is for.

"Works of art are created to be viewed," says Louvre director Jean-Luc Martinez who describes freeports as the greatest museums no one can see.

Some see even higher stakes for contemporary works, as they can be whisked off before ever entering the public consciousness.

Storage puts the art "intellectually almost in a coma," says Joanne Heyler, the director of the Broad Museum.

Yachts could also be employed as a means to smuggle away masterpieces that are part of a country's national heritage, while it has been reported that art auctions sometimes take place on the vessels.

Still, tax avoidance and other criminal behaviour are the most pressing concerns.

"The extent to which yachts and art collections are used to get out of paying taxes is unknown, largely because of the complexities of international tax law and the intricate mechanisms the superrich use to shield their wealth from tax authorities," the journalist Gaby Del Valle recently wrote in Vox.

The very existence of tax havens within the EU is deeply concerning.

While the European parliament has issued strong and comprehensive recommendations to tackle tax avoidance, the European commission must also address the issue, stamping out tax evasion and money-laundering practices before they occur.

If progress is to be made at a global level on this front, the EU must fix its own problems first.

Author bio

Nicolas Tenzer is the chairman of the Paris-based Centre for Study and Research for Political Decision (Cerap), editor of the journal Le Banquet, author of three official reports to the government, including two on international strategy, and of 21 books.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

Why majority voting on EU taxation is a bad idea

Harmonising tax rates would probably not mean harmonising all tax systems to low rates – such as those in Ireland, for instance, but much rather an increase of taxes across the continent.

The EU's tax haven blacklist - impressive or impotent?

One year ago, the European Union published its first ever blacklist of tax havens. It is crucial that EU governments help end the era of tax havens to ensure the billions currently hidden from public coffers.

MEPs demand stronger rules against tax evasion

MEPs in the civil liberties and economic committees voted in favour of toughening up EU wide rules on tax evasion, as they gear up for institutional talks in March on the EU's anti-money laundering directive.

Tax havens: need for an EU response to global problem

We live in an age when the financial sector is becoming increasingly detached from the productive sectors, which is also one of the main reasons for the financial crises that have repeatedly shaken our societies.

News in Brief

  1. Lukashenko amends emergency transfer of power
  2. German centre-left picks Scholz as would-be chancellor
  3. EU has not ordered AstraZeneca vaccines beyond June
  4. Macron: Pandemic showed need for more EU integration
  5. Election win fuels Scottish nationalists' referendum plan
  6. Surge in migrant arrivals to Italian island
  7. EU embassy pays bail for Georgia opposition leader
  8. British aristocrats caught peddling Kremlin ties

Column

'Sofagate' was more about power than sexism

Sexism may have played a role, but the deeper meaning of Ursula von der Leyen's humiliation in the palace of Turkish president Erdoğan is political and geopolitical.

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Council enters into formal relations with European Parliament
  2. Nordic Council of MinistersWomen more active in violent extremist circles than first assumed
  3. Nordic Council of MinistersDigitalisation can help us pick up the green pace
  4. Nordic Council of MinistersCOVID19 is a wake-up call in the fight against antibiotic resistance
  5. Nordic Council of MinistersThe Nordic Region can and should play a leading role in Europe’s digital development
  6. Nordic Council of MinistersNordic Council to host EU webinars on energy, digitalisation and antibiotic resistance

Latest News

  1. EU and US urge Israel to defuse Jerusalem violence
  2. Frontex 'mislabelling minors as adults' on Greek islands
  3. Has Albania really met the 15 tests to join the EU? No
  4. Vaccine fairness plus Russia on table This WEEK
  5. EU ambassadors flock to Red Square for Putin's parade
  6. MEPs win battle for bigger citizens' voice at Conference
  7. Hungary gags EU ministers on China
  8. Poland and Hungary push back on 'gender equality' pre-summit

Join EUobserver

Support quality EU news

Join us